Govt weighs Union Bank-BoI merger to form new No. 2 bank

The government is drawing up a fresh blueprint to merge select public sector banks, said three people aware of the matter, as it aims to scale up such lenders and streamline overlapping operations under banking sector reforms planned over the next few years.

- Subhash Narayan

The discussions at the finance ministry are around a merger of Union Bank of India and Bank of India, both headquartered in Mumbai, said the first person mentioned above. If the merger goes through, it will create a state-run lender ranked second only after the country's top bank by assets, State Bank of India.

The second largest public sector bank today is Bank of Baroda with total assets of ₹18.62 trillion as of 30 June 2025. This asset base ranks it fourth among all banks, private ones included, behind HDFC Bank and ICICI Bank. A merged Union Bank of India and Bank of India would have assets of ₹25.67 trillion, rubbing shoulders with ICICI Bank (₹26.42 trillion).

The ministry is also weighing the option to merge Indian Overseas Bank and Indian Bank, both Chennai-based lenders with a significant presence in Tamil Nadu and neighbouring states, the first person mentioned above said.

All three people quoted earlier preferred to stay anonymous.

As part of the plan, Punjab & Sind Bank and Bank of Maharashtra, lenders that are ranked lower by assets among public sector lenders, are being considered as potential candidates for privatization in later phases.